According to Morgan Stanley, 30-40% of the revenue and over 50% of technology company profits come from recurring revenue- and that number is even higher for SaaS/XaaS organizations. From 2012-2014 “cloud billing” will grow by about 35%
Given it’s importance, one would expect that companies depending on recurring revenue would have that re-sell process firmly in hand. But if, like this writer, you have recently fielded a call from a supplier’s customer service or even billing department, awkwardly attempting to secure your contract renewal, its pretty obvious that this process is often very poorly managed.
There are so many ways to make a mess of this sales opportunity it was hard to pick my top four, but here they are:
4 Ways to Absolutely Suck at Making More Money on Renewals
1- Leave it in the hands of customer service, accounting or email campaigns. We want renewal revenue to be as simple as just paying another bill- and so we get lazy. But making the most of your recurring revenue opportunities is a sales job. Your salse reps know that not getting a “NO” is not the same as getting to “YES”. You need to close those renewals. And even more important? You need to upsell, cross sell and prospect those customers for new opportunities and referrals.
And don’t think that the 27 emails you sent with the billing reminders are doing you all that much good. Sorry to mention it but most of the emails you send to your customers will go unread. How else can you possibly explain that the number one reason cited by non-renewing customers is that “no one contacted me” which is absolute idiocy.
2- Use the wrong measurements to evaluate your performance. There are distinct stages in the process that give you recurring revenue and you will never be able to manage or grow this foot-in-the-door income opportunity until you can measure the the performance of your organization and your sales effort against some meaningful benchmarks. A simple year over year number might be good to look at but it’s doing absolutely nothing diagnostically to help.
You need your decision rate, which will tell you how many and what percentage of your customers acknowledged your efforts to renew their agreement and gave you any answer. You need to know your churn stats and how your sales team is performing relative to:
- actually closing the people who didn’t say “get lost”
- upselling and cross selling (what and to which types of product/service)
- uncovering new opportunities and referrals
And you need to see your overall performance vs YAG
3-Wait too long to get the show on the road
The decision as to whether or not to renew your offering will depend on a lot of things, the most important of which being- “Did the customer perceive that they experienced the benefit they bought you for?” This is not only affected by the realities of adoption rates and usage, but also by not letting those new benefits and advantages slip out of mind and out of sight. Ignoring these factors all year long and only establishing contact 60 or even 30 days out from the renewal, perhaps even then with nothing more than an annual bill, will send your revenue performance on a steep, downhill slide.
4- Use your sales team the wrong way. They’re called your sales team, not your “calling to touch base and made sure you saw our invoice” team. Nor are they your “calling to make sure you saw our latest webinar about the new release features” or even your “calling to wish you Happy Birthday” team. (although these calls are not a bad idea when you decide that you want the relationship to be owned by sales. They are your SALES team.
Their job is to take the companies who are interested in renewing their agreements with you and close them down. They are supposed to cross sell associated services or products that are a good fit for their needs. They are supposed to make this year’s sales bigger and better than last year, which means go for the upsell.
Companies love recurring because its so profitable. Maybe the problem is that it’s a little too profitable because we just aren’t working either hard or smart enough to really take advantage of one of the few growing business opportunities.